Intermediate Accounting 18 Reporting Accounting Changes and Error Analysis.doc

Intermediate Accounting 18 Reporting Accounting Changes and Error Analysis
Reporting Accounting Changes and
Error Analysis
Chapter
18
Changes in accounting principle
Changes in accounting estimate
Reporting a change in entity
Reporting a correction of an error
Summary
Motivations for change of method
Accounting Changes and Error Analysis
Accounting Changes
Error Analysis
Balance sheet errors
e statement errors
Balance sheet and e statement effects
Comprehensive example
Preparation of statements with error corrections
Types of Accounting Changes:
Change in Accounting Principle3>.
Changes in Accounting Estimate.
Change in Reporting Entity.
Errors are not considered an accounting change.
LO 1 Identify the types of accounting changes.
Accounting alternatives:
Diminish parability of financial information.
Obscure useful historical trend data.
Accounting Changes
Average cost to LIFO.
Completed-contract to percentage-pletion.
A change from one generally accepted accounting principle to another. Examples include:
Changes in Accounting Principle
LO 2 Describe the accounting for changes in accounting principles.
Adoption of a new principle in recognition of events that have occurred for the first time or that were previously immaterial is not an accounting change.
Three approaches for reporting changes:
Currently (cumulative effect).
Retrospectively.
Prospectively (in the future).
FASB requires use of the retrospective approach.
Changes in Accounting Principle
LO 2 Describe the accounting for changes in accounting principles.
Retrospective Accounting Change Approach
Changes in Accounting Principle
LO 3 Understand how to account for retrospective accounting changes.
Company reporting the change
adjusts its financial statements for each prior period presented to the same basis as the new accounting principle.
adjusts the carrying amounts of assets and liabilities as of the beginning of the first year presented, plus the opening